Seoul: North Korea threatened to launch a "sacred war" against South Korea on Wednesday even as a delegation from Seoul travelled across the countries' heavily fortified border for a meeting on a stalled joint tourism project.

A North Korean government spokesman accused front-line South Korean army units of setting up "virulent" signs that slander North Korea and inciting "extreme hostility" towards Pyongyang.

"This is little short of a clear declaration of war," the unidentified spokesman said in comments carried by the North's official Korean Central News Agency. "We will react to the enemy's provocation with a stern punishment and counter its war with a merciless retaliatory sacred war."

The threat came one day after a South Korean newspaper reported that some South Korean army units near the border had set up anti-North Korea slogans in the wake of two deadly attacks blamed on North Korea last year.

The newspaper carried a photo showing a banner reading "Let's ram guns and swords into the chests of North Korean puppet soldiers!" hanging over the entrance of one army unitin Cheolwon, a town near the central portion of the demilitarised zone separating North and South Korea.

The newspaper said the unit also wrote on its walls such signs as "Let's hack the three Kims into pieces," a reference to late North Korea founder Kim Il Sung, his son and current leader Kim Jong Il, and grandson and heir-apparent Kim Jong Un.

South Korea's Defence Ministry confirmed the substance of the report, saying some army units have taken such measures to bolster their soldiers' mental toughness against NorthKorea.

The two Koreas are technically still at war because their 1950s conflict ended with a cease-fire, not a peace treaty.

North Korea's threat to attack South Korea is only the latest in a series of warnings and hostile statements from Pyongyang aimed at the conservative government of South KoreanPresident Lee Myung-bak.

It comes as the two Koreas were to meet on Wednesday to discuss North Korea's seizure of South Korean assets at the North's scenic Diamond Mountain.